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Implications for Managers of Multinational Corporations (MNCs) - Essay Example

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The process of expansion for the multinational companies has been facilitated due to liberalization by the governments of other nations, due to free flow of money across borders and due to the growth in world trade. Organizations can source not only raw materials but even human resources from anywhere across the globe…
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Implications for Managers of Multinational Corporations (MNCs)
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Download file to see previous pages However, managers of the multinationals that seek to venture into emerging economies need to evaluate the business environment as their strategies are shaped by forces beyond their control. The managers have a vital role to play while formulating new strategies and organizational structures when dealing with Governments and companies in emerging markets. Financial strategy The emerging markets have fast growing GDPs thereby offering the MNCs with great opportunities and profit potential. However, the MNCs face not only the risks of cultural and institutional differences, the managers of the MNCs also have to take into account the risks inherent in unpredictable politics and unstable economies (Anonymous, 1995). The managers thus have the responsibility to develop financial strategies that provide protection from excessive risks. As far as financial strategies are concerned, some MNCs use instruments such as asset-backed securities while others work with regional and global banks. Financial institutions such as the Asian Development Bank help the governments establish priorities for economic reform and development. The regional/local governments offer resistance to MNCs as it fears the domestic production would be affected. The governments feel that while the MNCs would bring cutting-edge technology along with FDI into emerging economies, there is resistance from the domestic competitors. The managers must also take into account technology transfer, cultural distance, international experience, immigrant experience, industrial barriers, foreign exchange rate and host country barriers (Zhao & Decker, 2004). The MNCs have the power to stifle economy because of their sheer size or so believes the emerging economy governments and hence the MNCs may face protectionist attitude from the host governments. MNCs may have anti-corporate and anti-establishment sentiments triggered by the civil societies in the host governments. Thus through the right entry strategy the managers can overcome resistance offered by the protectionist government. The MNCs enter Central and Eastern Europe by forming strategic alliances through acquiring privatized firms or state-owned enterprises (Rondinelli & Black, 2000). These MNCs face the challenge of privatization although some governments do move ahead at speed to privatize the SOEs. Some Eastern Europe governments do make it difficult for foreign investors to enter into strategic alliances or form joint ventures. Russia receives very little FDI because of the high tariffs and non-tariff barriers on FDI. In fact, in some of the developing economies, the MNCs are seen as threats by some SOEs, privatized companies, government agencies or political interest groups that do not support foreign domination. Therefore the challenge for the MNC managers lies in developing alliances or acquisitions that benefits the shareholders, the host-country counterparts and the local government as well. The managers must hence prioritize business objectives while also selecting the best entry channels. They must evaluate the potential impact on the host-country stakeholders and determine local partner fit. If MNCs are seen as partners in privation and economic transformation the alliances or acquisitions are more likely to succeed. Substantial restructuring may need to be implemented by the MNCs to ...Download file to see next pagesRead More
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